Carl Icahn’s investment company, Icahn Enterprises (IEP.O), won the dismissal of a lawsuit that accused it of artificially inflating its share price by issuing unsustainably high dividends to help Icahn secure large personal loans.
On Friday, U.S. District Judge K. Michael Moore in Miami ruled that shareholders in the proposed class action failed to prove the company made material misrepresentations or omissions with fraudulent intent.
Lawyers representing the shareholders did not immediately respond to requests for comment, and a spokesman for Icahn Enterprises also declined to comment. Judge Moore gave the shareholders until October 14 to file an amended complaint.
Icahn Enterprises shares have lost more than three-quarters of their value since May 2023, when the short-selling firm Hindenburg Research raised concerns about the company’s dividends and Icahn’s borrowing. The firm also accused Icahn of running a “Ponzi-like economic structure.”
In August, Icahn agreed to pay $2 million to settle U.S. Securities and Exchange Commission civil charges, without admitting wrongdoing, after the SEC claimed he failed to disclose significant borrowing against his shares.
Shareholders argued that the true financial condition of Icahn Enterprises became apparent as its Auto Parts Plus business went bankrupt, the company reduced its dividend, and Icahn renegotiated his loans. Icahn, who owns about 85% of his company’s shares, personally lost billions of dollars as the share price plummeted.
In his 28-page decision, Judge Moore referenced the company’s disclosures, noting that Icahn Enterprises had warned it might reduce dividends and provided sufficient information about Carl Icahn’s borrowing to alert investors to potential risks. Moore also pointed out that the company’s 2021 annual report disclosed Icahn’s share pledges, and there were no allegations of insider trading.
Moore concluded that Icahn and other defendants appeared to believe in the long-term value of Icahn Enterprises, which contradicts the theory that they were inflating the stock price for personal gain.
The case is Kosowsky v. Icahn Enterprises LP et al, U.S. District Court, Southern District of Florida, No. 23-21773.
